Webster Financial Corporation

call. Mr. Harmon, please go ahead.

Good morning. Before we begin our remarks, I want to remind you that the comments made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the Safe Harbor rules. Please review the forward-looking disclaimer in Safe Harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us. The presentation accompanying management's remarks can be found on the company's investor relations site at investors.websterbank.com. For the Q&A portion of the call, we ask that each participant ask just one question and one follow-up before returning to the queue. I will now turn the call over to Webster Financial CEO, John Sciulla.

Thanks a lot, Emlyn. Good morning and welcome to Webster Financial Corporation's second quarter 2024 earnings call. We appreciate you joining us this morning. I'll provide remarks on our high-level results and operations before turning it over to Glenn to cover our financial results in greater detail. There have been a number of important accomplishments since our last earnings call, including the announcement of our private credit joint venture with Marathon Asset Management, the hiring of Neil Holland as our next Chief Financial Officer, and the addition of Bill Haas to our Board of Directors. The Marathon joint venture is a great opportunity for Webster, as it will allow the sponsor team to better serve and meet the growing needs of our client base. while at the same time enhancing Webster's balance sheet flexibility and adding a new source of fee income and deposit opportunities. Our sponsor team will continue to operate in its existing form, and by partnering with Marathon to fund a portion of our loan originations, we'll gain the ability to offer larger facilities and additional financing solutions to our existing clients that we would not traditionally hold on our balance sheet. We're also very excited about the new leaders we have brought into the company. Neil is a great addition to our executive management team. In addition to his many talents, Neil brings years of experience leading finance organizations at large banking institutions. He was CFO of First Republic prior to Webster, having joined their team in November of 2022. The 14 years prior to that, Neil was with MUSG and their union bank subsidiary, where at different times he served as CFO, chief accounting officer, and head of FP&A of their Americas organization. balance sheet with over $300 billion in assets. He also served as CFO of their regional bank. I think you'll share my enthusiasm as each of you have opportunities to engage with him following Glenn's transition in early August. Bill Haas, who joined Webster's board of directors last week, is also a great addition to the company. Bill is coming off a 38-year career at the OCC, where he was deputy controller for mid-sized bank supervision. His extensive regulatory and risk management background will be tremendous asset to our board of directors. In combination, these additions illustrate our commitment to investing in the people and processes that will advance the capabilities of our company as we grow and create long-term franchise value for stakeholders. I'll now turn to our financial performance for the quarter, beginning on slide two. On an adjusted basis for the quarter, we generated a return on average assets of 1.16%, and a return on tangible common equity of 17.1%. Our adjusted EPS was $1.26. Our efficiency ratio was 46%. We were pleased to grow core deposits by $700 million and used a significant portion of the funds to redeem wholesale funding. Loans grew by $500 million, or just under 1%, with growth anticipated to continue in the back half of the year. On slide three, we recap our unique deposit funding profile, where I specifically want to highlight encouraging developments at HSA Bank and Amitros. At HSA Bank, investments we've made to enhance our technology via the VEND acquisition two years ago are bearing fruit. We advanced our digital experience, which led to some significant client wins during selling season this spring and bodes well for our deposit balances next year. These investments in technology also provide flexibility to improve our solution. In the third quarter, we will launch a new investment offering, which provides a discrete opportunity to add roughly $400 million in deposits. In the quarter, we also extended our long-term relationship with Cigna, our largest HSA partner relationship. Amitros continues to produce the robust deposit growth we anticipated when we announced the acquisition at the end of last year. Additionally, we will begin offering Webster Banking products to Amitros' member base in the third quarter. This opportunity was not anticipated in our original projections for Amitros and strengthens the strategic rationale for the acquisition in addition to the value proposition for Amitros' member base. On slide four, we provide an updated overview of our commercial real estate portfolio, focusing on the two portfolios that are capturing most of the headlines. There were no significant changes to the performance characteristics of our rent-regulated multifamily portfolio, where our conservatively underwritten portfolio's performance has held up really well, as you can see by consistently low levels of classified and non-accrual loans. The portfolio is granular, has conservative LTVs and debt service coverage ratios, was underwritten to property cash flows at the time of origination, and has limited maturities in the next two years. For office, we also have a portfolio that is granular with conservative underwriting characteristics. As the sector continues to be challenged, we did have several loans moved to non-accrual, which was the primary driver of the increase in our overall MPLs this quarter. Office balances were $950 million at the end of the second quarter, down from just over a billion last quarter. In our office portfolio, approximately 75% of the remaining loan balances have some form of credit enhancement, which adds significant value in mitigating potential losses. A few important comments to make as it relates to overall credit. Even with the negative risk rating migration, our MPO ratio, classified loan ratio, and annualized charge-off rate in the quarter all remain proximate to or better than pre-pandemic Webster levels, meaning these metrics remain consistent with a more normalized credit environment. As we continue to aggressively and proactively manage and review the portfolio, absent a material change in the environment or unforeseen surprises, We don't see this rate of grade migration continuing in Q3. Finally, with a 1.3% reserve coverage, our CET capital accreting back to 11% by year-end, and our strong operating and capital generation capabilities, we remain confident in our ability to navigate through whatever this credit cycle throws at us. With that, I'll turn it over to Glenn to cover our financials in more detail.